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Validity of the Fama-French Three- and Five-Factor Models in Crisis Settings at the Example of Select Energy-Sector Companies during the COVID-19 Pandemic

Author

Listed:
  • Konstantin B. Kostin

    (World-Class Research Center “Advanced Digital Technologies”, State Marine Technical University, 190121 Saint-Petersburg, Russia)

  • Philippe Runge

    (Graduate School, Nordakademie, 22767 Hamburg, Germany)

  • Leyla E. Mamedova

    (World-Class Research Center “Advanced Digital Technologies”, State Marine Technical University, 190121 Saint-Petersburg, Russia)

Abstract

This study empirically analyzes return data from select energy companies in developed and emerging markets using the Fama-French three- and five-factor asset-pricing models in crisis settings. It researches whether these models are suitable to produce meaningful return data in challenging economic circumstances. We use panel data covering 12 of the largest globally-operating energy companies from Russia, China, the US, the EU, and Saudi Arabia, covering a period between 2000 and 2022. The results undermine the general notion that the usage of available multi-factor asset-pricing models automatically yields meaningful data in all economic situations. The study reiterates the need to reconsider the assumption that the addition of more company-specific factors to regression models automatically yields better results. This study contributes to the existing literature by broadening this research area. It is the first study to specifically analyze the performance of companies from the energy sector in a crisis like the COVID-19 pandemic with the help of the Fama-French three- and five-factor models.

Suggested Citation

  • Konstantin B. Kostin & Philippe Runge & Leyla E. Mamedova, 2022. "Validity of the Fama-French Three- and Five-Factor Models in Crisis Settings at the Example of Select Energy-Sector Companies during the COVID-19 Pandemic," Mathematics, MDPI, vol. 11(1), pages 1-13, December.
    • Handle: RePEc:gam:jmathe:v:11:y:2022:i:1:p:49-:d:1012286
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    References listed on IDEAS

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